Employment in Office-Using Industries Rose 1.8 Percent Year over Year
February 14, 2019
Houston – According to Transwestern’s fourth-quarter national office market report, the U.S. office market continued to benefit from healthy employment growth in office-using industries, resulting in overall higher asking rents, stable absorption, and a rebound in construction activity at the end of the year. The national office vacancy rate ended the fourth quarter at 9.8 percent. Asking rents climbed to $26.36 per square foot, a 3.7 percent annual growth rate that exceeded the five-year average of 3.3 percent.
“Office-using employment rose 1.8 percent annually as of November, to a record 35 million jobs,” said Ryan Tharp, Research Director in Dallas. “As a result, absorption surpassed 21 million square feet in the fourth quarter, propelling the office market through year-end. However, with quite a few projects on track to deliver in the first half of 2019, it will be a challenge to maintain a national office vacancy rate below 10 percent over the coming quarters.”
Total construction volume at the end of the fourth quarter was 152.4 million square feet, with New York, Seattle, Dallas-Fort Worth, Chicago and Washington, D.C., having the most space underway. Tharp explained that this could affect future rent growth in these markets, with the exception of the D.C. metro, where optimism abounds due to Amazon’s new headquarters plans. Washington, D.C., currently has the third-highest asking rents in the country, behind San Francisco and Manhattan.
In nearly all markets, property upgrades and a focus on new building amenities have contributed to the rise in asking rents. In Minneapolis, where vacancy sits at 8.3 percent and only 617,000 square feet is currently under development, rents spiked 14.1 percent in 2018 to $22.91 per square foot, almost four times the national average. A total of 13 markets tracked by Transwestern posted annual rent growth of 5.0 percent or higher in 2018.
Download the full national office market report at: http://twurls.com/4q18-us-office
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